Fox Rothschild Cleared in Case Over Ponzi Schemer's Transfers
Handing a win to Fox Rothschild, the decision clarifies the duty of law firms to police client funds flowing through attorney trust accounts.
January 09, 2020 at 02:47 PM
4 minute read
The original version of this story was published on New Jersey Law Journal
(Courtesy photo)
The New Jersey Supreme Court on Thursday absolved Fox Rothschild of claims that the firm improperly transferred $2.4 million from its attorney trust account to now-convicted Ponzi schemer Eliyahu Weinstein, finding that law firms are under no obligation to break with clients' directions unless they are aware of a competing claim on funds.
In a unanimous opinion, the state's high court overturned a June 2018 decision by an intermediate appeals court that reinstated U.K. real estate investor Moshe Meisels' conversion claim against Fox Rothschild. Meisels had alleged that he was bilked by Weinstein, who previously pleaded guilty to running a yearslong real estate Ponzi scheme that caused $200 million in losses, and that more than $2.4 million he lost moved through the firm's attorney trust account.
"The firm acted in conformity with its client's instructions about funds lawfully held in the firm's trust account; plaintiff did not have the funds wire transferred to the firm with any direction or instructions; and plaintiff made no demand for the funds until years after the transaction was concluded, far too late to alert the attorney that there was a contrary claim," the court said in a 25-page opinion written by Justice Jaynee LaVecchia.
The justices also kept intact a decision by a trial court, later affirmed by the intermediate appellate court, rejecting Meisels' breach of fiduciary duty claims against Fox Rothschild.
Meisels' lawsuit against the firm and former partner Anthony Argiropoulos, the one-time co-administrator of the litigation department in its Princeton, New Jersey, office, dates to 2013. Argiropoulos left Fox Rothschild in 2008 and is currently the co-chairman of Epstein Becker & Green's national litigation steering committee.
In the lawsuit, Meisels alleged that he and Weinstein reached an agreement to invest in property in Irvington, New Jersey. In connection with that deal, Weinstein in 2007 directed Meisels to transfer a portion of the investment into Fox Rothschild's attorney trust account, according to court documents. Weinstein, who was later sentenced to 22 years in prison for his Ponzi scheme, told Meisels at the time that Fox Rothschild was carrying out legal work on the property purchase.
Meisels transferred the money, and it later went into the coffers of some of Weinstein's businesses, with $75,000 of it going to Fox Rothschild. The money was never used to purchase any property and, in his suit against the firm, Meisels alleged that Fox Rothschild effectively aided Weinstein as he carried out his fraud.
Lawyers from Fox Rothschild attacked Meisels' claims on several fronts, ultimately convincing a trial court to dismiss them in a summary judgment ruling. Among other arguments, Fox Rothschild said Meisels couldn't pursue his conversion claim because he didn't do enough to show that he actually owned the money he allegedly lost, and because he never demanded its return.
Meisels countered that, while the transfers to the attorney trust account technically came from a company called Rightmatch Ltd., the business was serving merely as a conduit for the London-based Meisels to help convert his own personal funds from the British pound to U.S. dollars.
But the high court concluded that, knowing nothing about Meisels and the connection to the funds in question, Fox Rothschild was not at fault.
"Funds held in an attorney's trust account for its client are the client's funds, not the firm's," LaVecchia said. "Here, with no knowledge of a competing claim to the funds—and, indeed, no knowledge whatsoever about Meisels and his role in the transaction—the firm acted appropriately in adhering to the client's directions concerning funds over which the firm did not have independent ownership or interest; in other words, the firm had no separate dominion or control over the funds."
Fox Rothschild's defense lawyer, Francis Devine III of Pepper Hamilton, did not immediately respond to a request for comment, nor did a lawyer for Meisels, Brian Condon of Condon Catina & Mara in Nanuet, New York.
Read More
Fox Rothschild Headed to New Jersey Supreme Court in Case Stemming From Ponzi Scheme
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